Private and prejudice

Profit-obsessed, conservative, afraid of taking chances and, according to deputy prime minister John Prescott, the root cause of Britain's housing crisis – the stereotypical image of housebuilders is enough to rile the most mild-mannered professional. But Martin Donohue, chief executive of Britain's sixth-largest private housebuilder and therefore right in Prescott's firing line when he attacked housebuilders at the Urban Summit in October, shrugs it off.

"We're an easy target," he says. "Prescott can't blame his own department, or local authorities, so he picked on the easy target."

The deputy prime minister's view of the housebuilding industry is antiquated, continues Donohue: "Only 10 years ago, a large part of the industry was owned by subsidiary parts of major construction businesses. Most of that has changed, making us more focused and dynamic."

It's the planning system that is causing the problems of undersupply, Donohue believes – at present Westbury only produces 100 social housing units a year. He bemoans the fact that planning departments in local authorities, which perform "a key function of the construction process", are woefully under-resourced. The Communities Plan, Prescott's grand housing vision – yet to be announced at the time he met Housing Today – will streamline the planning system to the greater good, he hopes. "I hope that perhaps one day we can get planners back to doing planning rather than development control."

Donohue speaks with the self-assurance of more than three decades' professional experience of the building sector. In 1970, when he joined Laing's management training programme, he was recently married and under whelmed by spells in the civil service and the army; "the construction industry represented a good opportunity," he says. After moving to Westbury in 1972, he worked his way up to become chief executive, in which job his desire for progress in building techniques earned the company an annual turnover of £476m and Donohue a reputation for innovation.

"Martin is certainly one of the more progressive chief executives around, particularly in off-site manufacturing," says Alex Ely, housing coordinator at the Commission for Architecture and the Built Environment. "He's been very brave."

Donohue's innovative drive has most notably manifested itself in the company's off-site manufacturing efforts. In April 2001, when Prescott's support of factory-built housing as a way to tackle the housing crisis was but a twinkle in the deputy prime minister's eye, Donohue oversaw the opening of Space4, Westbury's £13m factory for prefabricated timber-frame homes. The factory has increased Westbury's output significantly – the company expects to complete 5000 housing units this year, rising to about 8000 per year by 2007 – and, if the components are sold to other organisations, they may well end up used in social housing. Prescott himself, despite his professed dislike of housebuilders, met Space4 executives last autumn and endorsed its methods as a way to boost the creation of homes in response to the housing crisis.

Space4 was the result of five years' work with Warwick University. Exploring reasons for the dearth of new housing, researchers found lessons to learn from other industries: the car industry, for example, had exploited the factory environment to mass-produce precision-made parts, driving down costs and reducing the potential for mistakes during assembly. In housebuilding, existing brick-built methods can be wasteful of both materials and man-hours; factory-made panels bolted together on site could address these problems. It could also tackle the construction sector's skills shortage, Donohue says: "At present construction sites are places where only the master 'he-men' can work. It'll take a few years to filter through, but employing Space4 methods will improve conditions on site, and make them more habitable places, where a wider set of skills can be applied."

If we don’t address the imbalance of supply and demand across all tenures, the inexorable problem of affordability will just get worse

Donohue believes the fundamental problem is the imbalance between supply and demand – regardless of tenure. "If we don't address that, the inexorable problem of affordability will get just get worse," he says. He estimates that British builders are under-producing homes by 40,000-70,000 a year. "We need to get to a run rate of 200,000, and sustain that for some time to bring equilibrium back to the market," he says.

But why, if he cares so much, doesn't Westbury lead the way by providing more social housing? Until eight years ago, the company produced more than 700 social housing units a year; nowadays it does about 100. The suggestion that his company should create more low-cost homes is "rather misguided", says Donohue. "We're here for the creation of profit," he says, adding that the changing role of registered social landlords is also a disincentive: "We found that RSLs were turning into developers.

The service we had provided to social landlords, essentially a complete turnkey building operation, was no longer required. So our ability to work in that market diminished."

Nevertheless, didn't the company consider adapting its service to maintain a foothold in social housing? "This was not a time for deep-seated philosophical reflection," he says, defiantly. "At the time the housing market was fragile, to say the least.

"I talk to a lot of people in the social housing sector, and there are some who believe that private housebuilders ought to be in competition with social housing providers. That's not something for us to fear, but it doesn't strike me as the best use of their resources." Housebuilders and housing associations should each "stick to what they know best", he says.

But Donohue refuses to rule out the possibility of doing more work in the social sector in the future – although, he adds, market conditions would have to allow Westbury to make an "adequate profit".